Electricity may get costlier as states demand higher royalty on coal: India Ratings

Chhattisgarh’s request for a revision in royalty rates on coal to 30 per cent from the existing 14 per cent ad-valorem, will push up the cost of electricity by 7 per cent or 10-12paisa/kWh, India Ratings today said in a report.

The state government has constituted a study group to consider the revision in the royalty rates based on the request. “Ind-Ra believes the royalty hike looks quite steep at 30 per cent, and if accepted, it will lead to coal attracting the highest ad-valorem duty compared to all other minerals,” the report said.

Assuming a pithead price of Rs 720 per tonne for coal, the royalty increase will also lead to a higher contribution towards district mineral foundation (DMF) at 30 per cent of royalty and National Mineral and Exploration Trust (NMET) at 2 per cent of royalty, which translates into a higher cost of electricity generation by 10-12paisa/kWh.

Since January 2015, coal consumers have been hit by rising prices due to the imposition of DMF and NMET (effective January 2015), taking the effective royalty rate up to 18.48 per cent from 14 per cent. Additionally, if the royalty rates were to increase to 30 per cent, the effective royalty rate would be 39.6 per cent including DMF and NMET contribution.

Furthermore, the clean energy cess increased to Rs 400 per tonne from Rs 200 per tonne in the Union Budget 2016. During May 2016, Coal India Limited (CIL) increased the run-of-the-mine prices for the most widely supplied grades of coal to the power sector by an average of 16 per cent. Similarly from 1 April 2015, freight charges for coal were hiked by 6.3 per cent.

Therefore, the variable cost of generation for a plant situated 500km from the mine which used to receive grade G13 coal, has increased by 24 per cent to Rs 1.69/kWh. “If the revised royalty rates were to be accepted as proposed by the Chhattisgarh government, the variable cost of generation can increase by another 7 per cent,” India Ratings said.

It added that on the positive side, coal linkage rationalisation for companies has led to a decline in the transportation costs, thus easing some impact. Industrial power rates are a critical pre-investment consideration for manufacturers and given that bulk of the coal-based capacity in India is on a cost pass-through basis, the ultimate impact of such hikes is passed on to consumers. Such regular hikes in one form or the other are not a healthy sign for thermal power generators.

“Ind-Ra believes that as alternate sources of power namely solar see further reduction in tariffs, the competition between thermal and solar will intensify, with a high probability of solar winning. These price hikes have played out at a time when the all-India power situation continues to improve and CIL is looking at a coal surplus situation, with the possibility of coal also being exported,” it said.

Even after the hike, the coal supplied domestically by CIL continues to be cheaper than the imported coal. Coal has seen a change in royalty rate in 2012, with the royalty being changed to the ad valorem basis at 14 per cent from the earlier system of tonnage based and ad-valorem with royalty on Grade D/E coal being Rs 70 per tonne plus 5 per cent of CIL run of the mine price.

It further said the states will benefit at the expense of consumers paying more for electricity. “Ind-Ra estimates that the increase in royalty up to 30 per cent for the top three states could result in an additional income between Rs 5 billion to Rs 39 billion, depending on the final royalty rate,” it said.

Country's largest power producer NTPC expects to cut losses from Chhabra power station that it acquired last week to one-fifth by saving on interest outgo and raising operational efficiency. The company is on lookout for more state-run stressed assets for buyouts, sources said.The tariff of the project is expected to come down by Rs 0.05 a unit to Rs 3.84/unit.

NTPC Last Thursday announced acquisition of 1000-mw power plant owned by state generating company of Rajasthan. It signed an agreement with Rajasthan Vidyut Nigam to acquire 1000-mw operational stage I of the power plant and 1320-mw stage II of the project that is under construction.

In October last year, Rajasthan Electricity Regulatory Commission approved cost of stage-I of the project at Rs 5053 crore. After depreciation, Stage I of the project has been valued at Rs 3,900 crore, of which the debt portion is at Rs 3200 crore and equity at Rs 700 crore.

Stage I of the power station comprises of four sub-critical technology based units of 250-mw each operating at highly inefficient parameters. At an interest outgo as high as at 10.75%, the plant was losing Rs 295 crore annually.

With NTPC takeover the heat rate-- heat generated per calorie of coal burnt -- expected to come down to 2400 kcal/Kwh. Coupled with low-cost funding advantage at 8%, NTPC is confident of narrowing losses to Rs 66 crore a year once it starts generating electricity from the project. NTPC is expected to complete the acquisition of stage-I next month.

NTPC will provide project management services to Rajasthan generation co mpany for expeditious completion of stage II of the project. The cost of the second stage of the project of two units of 660-mw each is estimated to have risen due to delay to Rs 9750 crore comprising 80% debt and 20% equity. The first unit of 660-mw of the second stage is expected to be commissioned by next month and second unit by June next year.

Integrated power company Tata Power Co Ltd today said the company has become the largest renewable energy company in India with its non-fossil operating capacity reaching 3,060 Megawatt.

Tata Power said its non-fossil fuel portfolio comprises 693 MW hydro, 918 MW solar, 1,074 MW wind and 75 MW of waste gas-based generation.The company added that it the company has revised its share of non-fossil fuel based capacity up to 35-40 per cent by 2025.

In FY16, Tata Power Renewable Energy Ltd (TPREL), a wholly owned subsidiary of Tata Power, completed the acquisition of Welspun Renewables Energy Private Limited (WREPL) to become the largest Renewable Energy Company in India.

Welspun Renewables has one of the largest operating solar portfolios in India spread across ten states. It has about 1,008 MW of Renewable Power Projects comprising of about 862 MW Solar Power Projects and about 146 MW of wind power projects.

In FY16, Tata Power Renewable Energy Ltd (TPREL), a wholly owned subsidiary of Tata Power, completed the acquisition of Welspun Renewables Energy Private Limited (WREPL) to become the largest Renewable Energy Company in India. WREPL has one of the largest operating solar portfolios in India spread across ten states. It has about 1,008 MW of Renewable Power Projects comprising of about 862 MW Solar Power Projects and about 146 MW of Wind Power Projects.

"This is one of the many key milestones in our endeavor to generate 35-40 per cent of Tata Power's total generation capacity from clean energy sources. This mammoth leap is well in line with our aim to enhance and increase our non-fossil fuel capacity, and maintaining our value of sustainable growth,” Anil Sardana, Chief Executive Officer and Managing Director, Tata Power, said.

Tata Power together with its subsidiaries and jointly controlled entities has an installed gross generation capacity of 10496 MW and a presence in all the segments of the power sector such as fuel security and logistics, generation, transmission, distribution and trading.

Wind energy company Suzlon Group today said it has achieved the 10,000 Megawatt cumulative wind energy installations in India with over 7,500 wind turbines installed pan-India.

Suzlon’s 10,000 MW of wind installation is capable of powering over 5 million households per annum and offsets nearly 21.5 million tonnes of Carbon Dioxide (CO2) emission annually which is equivalent to planting over 1500 million trees.

“We are committed towards a ramp up in volumes, expand presence in focus markets, realizing business efficiencies, introduction of new generation products and enable digitization to enhance services and continuous optimization of the capital structure. We have established a multi-pronged strategy that covers continuous R&D and innovation in design, manufacturing and O&M services. We also have a strong presence across customer segments. Our team is looking forward to work collaboratively with our customers, bankers and partners to scale new heights and contribute towards a greener tomorrow,” Tulsi Tanti, Chairman and Managing Director, Suzlon Group, said.

Suzlon said going ahead it will focus on continuous research and development to harness technology and reduce Levelised Cost of Energy (LCoE) by increasing Plant Load Factor (PLF) and making low wind sites viable.

Suzlon has witnessed an overhaul in terms of Technology and its wide range of products is testament towards the same. Suzlon's end to end solutions approach and presence across entire value chain from concept to commissioning, proven execution capabilities and dedicated Life Cycle Asset Management service provider gives it a strong competitive advantage over its peers.

Two decades ago, Suzlon Group embarked on a journey in the clean energy space from Gujarat. Today, with cumulative wind energy installations of over 15,500 MW worldwide, Suzlon operates across 17 countries and has over 1,700 customers across the globe.

India is poised for huge growth in solar energy and it won't stop at the 100GW solar power target to be achieved by 2022, Power Minister Piyush Goyal has said.

"The 100 gigawatt target for solar should not be a constraint. India won't stop at 100 GW," Goyal said addressing the first India-specific session at a conference in Abu Dhabi.

"With the advent of new technology in storage, we are poised for huge growth. Solar growth will support landowners to derive income and solar industry to build their business," he said as per a statement issued today by industry body Ficci which has organised the World Future Energy Summit from January 15-18.

Goyal said: "With the advent of new technology in storage, we are poised for huge growth. Solar growth will support landowners to derive income and solar industry to build their business." The minster was of the view that India should manufacture in India for India and should assess what it would take for the country to be an end-to-end solution provider for solar energy.

"We can manufacture at scale. A subsidy regime is not the best way to move forward. We need to draw up a regime where government can be an enabler for manufacturing to compete at good quality and prices," Goyal said.

He added: "We need to foster partnerships with high quality technology suppliers. We will provide large tracts of land to manufacture at scale. Indian developers should also promote Indian manufacturing."

Sikkim is likely to join Ujjawal Discom Assurance Yojana (UDAY) next week taking the tally of states accepting the centre’s electricity distribution revival scheme to 22, amid growing focus on power reforms.

“A memorandum of understanding for this would be signed in 7-10 days,” said an official close to the development. The north-eastern state had an average AT&C loss level of 45.51 per cent, at the end of March 2015. The state government has projected bringing down the losses to 20 per cent by 2021-22.

UDAY was launched by the government in November 2015 to ensure financial stability for debt-ridden distribution utilities. Sikkim’s power department had nil outstanding debt at the end of March 2015, power minister Piyush Goyal had said in a written reply in Lok Sabha last August.

UDAY involves several measures to support reform initiatives of states and discoms including demand side management, increased power supply in areas where aggregate technical and commercial (AT&C) losses are reduced, measures to reduce cost of power generation, reduction of interest costs and exemption of debt-taken over from borrowing limits under the Fiscal Responsibility and Budget Management (FRBM) Act.

Experts say it makes economic sense even for a non-debt state like Sikkim to be a part of the scheme. “For such states, there might be other incentives like loss reduction and improved supply of low cost electricity,” said a senior analyst from an accounting and consultancy firm.

Wednesday, January 4, 2017

October 2016 must count as a significant month for the Indian power sector. It was when the conventional power capacity additions met the targets set for the 12th Plan Period (2012-17). For the first time in history, the plan targets were met five months ahead of schedule.

The Centre aimed to get installed 88,537 MW of thermal, hydro and nuclear power capacity during the plan period; as at end October, the capacity additions were 88,928.22 MW, or 100.44 per cent of the target.

By the end of November, the number increased to 90,463.22 MW, or 102.18 per cent of the target, according to data provided by the Central Electricity Authority (CEA). However, beneath the broad numbers, the story is not as rosy. While thermal exceeded its targets, hydro and nuclear fell short.

Within thermal, State government and private sector projects exceeded their targets, while those of the Centre stayed below the finish line. As at the end of November, India’s electricity generation capacity from conventional sources, stood at 262,917.28 MW.

Adding the 45,916.95 MW of renewable energy capacity (wind, solar, biomass and small hydro), the total power capacity in the country stood at 308,834.28 MW. Coal power accounted for 187,802.88 MW of this. CEA’s data also shows that power deficit has been almost eliminated. In November 2016, peak time and non-peak time power deficit were down to 0.6 per cent and 0.7 per cent of the demand.

A number of completed thermal plants — notably, around 10,000 MW of gas-fired plants — are lying shut. For example, only one of the two 600 MW units of IL&FS in Cuddalore, Tamil Nadu, is operational, though the other unit is also ready for generation. Industry experts say that when these plants begin to produce energy, India will become surplus on power.

Union Power Minister Piyush Goyal on Tuesday said two more states will join the Ujwal Discom Assurance Yojana (UDAY) on Wednesday and the third a week thereafter.

"Almost the entire country has now joined UDAY. Tomorrow (Friday), two large states will join the scheme, followed by one more very large state after one week," he said. He did not name the states.

"Thereafter, about 90-95 per cent of the national electricity utility debt of the discoms will come under UDAY. Maybe, one or two states will be left. I urge those states to join the scheme," he said after addressing a Confederation of Indian Industry National Council meet. He claimed there was no shortage of power anywhere in the country.

Asked whether the government will scale down coal production in the light of surplus power and coal, the minister said: "It is a dynamic situation. We continuously keep monitoring on how the demand-supply situation evolves. Power production has grown over 8.5 per cent in November. I would like to make sure we never relapse into coal shortage situation."

These and other estimates form the base for a draft National Electricity Plan-Volume II, which would be the basis for investment and policy planning in the sector. Inter-regional capacity addition during the 13th plan (2017-22) is estimated at 45,700 Mw, from the present 63,650 Mw by the plan end, said CEA in the draft.

The investment figure, it said, included an estimate of Rs 30,000 crore in transmission systems below 220 kv. About Rs 1.6 lakh crore would come from states and the other Rs 1 lakh crore from Power Grid Corporation of India. The government is planning to increase the size of projects and scope of work in transmission. Inter-state lines with capacity of around 56,000 Mw are being planned by the end of the 13th plan.

In the first volume, CEA had said more more thermal power generation capacity wasn't needed but supply needed to be more accessible and affordable. And, that renewable energy generation would be 20.3 per cent and 24.2 per cent of the total energy requirement in 2021-22 and 2026-27, respectively.

CEA says the already planned transmission corridors between regions is sufficient to cater to variable dispatches at peak times, with provisos.

The estimate is that India would need 100,000 circuit km (ckm) of transmission lines and 2,00,000 MVA transformer capacity of substations at 220 kv and above voltage was expected to be added in the 13th plan. It has suggested that investment be invited through competitive bids.

“It is expected that a total of 107,454 ckm of transmission lines and 287,836 MVA of substation transformation capacity additions are likely to be achieved during the 12th plan,” it has said. Various high capacity transmission corridors are in various stages of implementation and most are likely to be commissioned by 2021.

India’s peak demand for power is expected to rise from the current level of 153 GW to about 690 GW by 2035-36, according to the Perspective Transmission Plan of the Draft National Electricity Plan prepared by the Central Electricity Authority (CEA).

The CEA is the policy ideation and demand projection arm of the Ministry of Power. The report notes that this “can at best be an indicative plan giving broad transmission corridors across various regions and possible international exchange corridors.”

According to the CEA, the demand projection till 2022-36 includes the 14th Plan (2022-2027), 15th Plan (2027-2032) and first three years of 16th (2032-2036) Plan.The massive increase in power generation and transmission infrastructure would require an expenditure of Rs. 2,60,000 crore during the 13th Plan (2017-2022) alone. This also includes an estimate of Rs. 30,000 crore in the transmission system at below 220kV voltage level.

The generation projections under the draft National Electricity Plan note that there will be no need for coal-based power generation capacity addition in the country from 2017 to 2022. Effectively this suggests that all new projects during the 13th Plan need to be restricted to the transmission sector.

Integration of renewable energy into the grid will be a focus area, according to report. The transmission corridors between various regions are sufficient to cater to variable dispatches of wind and solar, both during evening peak and noon time (when solar dispatches are high), provided the gas generation is reduced to zero and coal based generation are also brought down as shown under various scenarios, the report said. The analysis assumes that, the all-India peak dispatch from wind would be 50 per cent of the wind installed capacity due to spatial diversity. It is also assumed that the all-India dispatch from solar plants would be 60 per cent of the installed capacity during summer months and 50 per cent during rest of the months.

State-run power equipment maker BHEL today said it has successfully commissioned another 600 MW coal-based thermal power plant in Telangana.

"The unit has been commissioned at the 2x600 MW Singareni Thermal Power Project (TPP) located in Adilabad district in Telangana. The project has been developed by Singareni Collieries Company Limited (SCCL), India's second largest coal mining company," BHEL said in a statement.

According to the statement, this is the second 600 MW unit commissioned by BHEL at Singareni TPP. The first unit of the project was commissioned in March, 2016.

BHEL-built 600 MW rating sets comprise a 4 cylinder turbine designed in-house. So far, the company has contracted 21 sets of 600 MW each, of which 17 have already been commissioned. A large number of similar sets ensure easy availability of spares and operator's familiarity.

The company is a major contributor to Telangana's power sector with over 85 per cent of the coal-based power stations, amounting to 5,740 MW.

Reposing confidence on BHEL s capability of setting up power plants, proven technological excellence and superior performance of equipment, the Telangana state utility has placed orders to the company for executing around 6,000 MW of thermal power projects in the state, on Engineering Procurement Construction (EPC) basis.

BHEL has established its engineering prowess by successfully delivering higher-rated units such as 600 MW, 660 MW, 700 MW and 800 MW thermal sets, having a high degree of indigenization, it added. KKS JM

Green seems to be the catchword for the government heading into the next year as it gears up to achieve 175 gigawatt of clean energy by 2022 through auction of 1,000 MW of rooftop solar power, Rs 13,000 crore investment in solar parks and a Rs 21,000-crore package to boost local manufacturing of panels.

By all yardsticks, 2016 remains a watershed year when solar tariff slumped to Rs 4 per unit and wind projects received a major thrust. The government is set to switch gears in 2017 to make India a hub for one of the largest installations of clean energy sources by 2022.

Minister for New and Renewable Energy Piyush Goyal offered a glimpse of things to come while speaking to PTI. Scaling up of rooftop solar programme, scheme to encourage domestic manufacturing of solar panels and making wind power affordable through auction of sites all fill up a packed 2017.

His ministry has in its sight Rs 1 lakh crore investment for the sector and is looking at 20 GW of power generation from non-conventional sources in 2017-18.

Beginning with speeding up the tempo for solar panel installation at homes, schools and hospitals through subsidies in 2016, plans are afoot to expand the rooftop programme to government buildings by providing target-based incentives.

In the November auction of 500 MW, subsidies for installation of as much as 432.7 MW of rooftop solar capacity were lapped up by 122 developers. A fresh tender for one gigawatt (1,000 MW) is now in the works.

The Prime Minister Narendra Modi-led government is eyeing generation of 100 GW from solar power alone by 2022. Rooftop solar capacity almost doubled to 1,000 MW in 2016 and the aim is to take this to 40 GW.

Also on the table is a green corridor to transmit 2,000 MW of power from 34 solar panels across 21 states.

For good measure, Goyal said, a scheme to promote domestic manufacturing of solar panels will become a reality in 2017. The Rs 21,000-crore module aims to create 5 GW of photovoltaic manufacturing capacity by 2019 and 20 GW by 2026.

India's renewable energy generation capacity stands at 45 GW.

According to Goyal, wind power is up next after successful reduction in solar tariff through transparent auction of sites. A mobility scheme is on the anvil to achieve 100 per cent electric vehicle-based transportation for India by 2030, he said without giving out specifics.

Early next year, the ministry will organise Global RE- Invest 2017 India-ISA Partnership, the second edition of the bi-ennial Renewable Energy Investors Meet and Expo to bring in investors. The event will build on RE-Invest 2015 and explore the advances to help meet India's ultimate target of adding 175 GW renewable energy capacity by 2022.

The ministry is keen on fostering competition among players, particularly in the wind energy space, to bring down tariff and make it a viable source of electricity for consumers.

The Global Renewable Energy Investors meet is the world's largest renewable energy investors gathering to be organised in 2017, Goyal said.

He spoke of launching renewable energy fund under the National Investment and Infrastructure Fund (NIIF). The ministry has been working on this USD 2-billion fund to make private players invest in the sector.

In 2017-18, the government is eyeing 20,450 MW power capacity addition from renewables, including 15,000 (solar), 4,600 MW (wind), 750 MW (biomass) and 100 MW from small hydro power (of up to 25 MW).

A total of 7,518 MW of grid-connected power generation capacity from renewable sources has been added this year (January to October 2016).

In 2016-17, a total of 1,502 MW capacity has come on board till October-end this year, making a cumulative realisation of 28,279 MW. Now, in terms of wind power installed capacity, India is placed at the 4th rank after China, the US and Germany.

As for solar power, a total of 1,750 MW capacity has been added till October-end this year, making it a cumulative 8,728 MW.

After bringing solar tariff to a record low of Rs 3 per unit, the minister indicated making wind power affordable.

He said, "There will be a wind auction to transparently reduce the tariff."

The government has planned solar energy from every roof in the country and there will be expansion of rooftop solar programmes next year. It has envisaged 40 GW of solar power from rooftop alone out of the total 100 GW planned to be added by 2022.

This flows from the need to push rooftop solar in a big way against the backdrop of a target of 40 GW grid connected solar rooftops by 2022. So far, about 500 MW of rooftop solar has been installed and about 3,000 MW has been sanctioned for installation.

All major sectors like the Railways, airport, hospitals, educational institutions, government buildings of central, state and PSUs are being targeted, besides the private sector.

A total sanction of USD 1,300 million has been received from the World Bank, KFW, ADB and NDB which will enable SBI, PNB, Canara Bank and IREDA to fund such projects at an interest rate of less than 10 per cent.

The ministry has tied up with ISRO for geo-tagging of all the rooftop plants using ISRO's VEDAS portal.

To reduce import of solar equipment from other countries, particularly from China, the ministry is keen to encourage domestic production to meet the huge power demand.

The minister said there will be focus on Make in India for solar power next year and a scheme to this effect may be launched. The government has also planned launch of founding conference of International Solar Alliance.

About use of renewable in farm sector, he said, "We will focus on Prosperous Farmer -- Pollution Free India. There will be scheme for Bio-mass like rice husk utilisation next year."

Major programmes such as implementation of solar parks, Solar Defence Scheme, have been launched during the past two years.

The increased use of indigenous renewable resources is expected to reduce India's dependence on expensive imported fossil fuel.

Saturday, November 5, 2016

For the last four days in consecution, peak power supply shortage in India has been consistently below 1,000 MW for the first time ever.

This, however, has been a result of falling demand over the same period which also resulted in half the power offered for sale at power exchanges remaining unsold.

Recently, there have been instances of power deficit being less than 1000 MW but those have been one off instances. Between October 29 and November 1, the peak demand deficit hovered between 649 MW and 830 MW.

In fact, this year peak demand shortages hovered below 2000 MW even when demand had touched 150,000 MW. In contrast, the defcit used to be at least 5000 mw last year. “In papers we are close to attaining zero power deficit and large number of states record zero deficit for days on, however, distribution companies are still to buy the adequate volume of power for everyone.

Financial crunch with discoms have been a stumbling block in attaining a real zero deficit. The centre’s scheme UDAY is a step to solve the issue,” said an analyst on condition on anonymity.

According to data released by the National Load Despatch Centre – the pan India body that takes care of power flow in the country, demand declined from about 130,000 mw to 1,30,000 during the four days in which power deficit fell below 1000 mw. In fact, during these four days, only about 50% of the power offered for sale at the power exchanges found buyers even at prices as low as Rs 2 per unit or less.

Around 40 of the 101 power plants under daily review by the Central Electricity Authority have coal stocks for less than 15 days, six plants have supply for less than seven days and 12 for less than five days. Power industry sources said the scarcity was due to a decline in coal supply and issues with operation of mines and evacuation.

“'There is no coal shortage. Stocks at two plants are super critical for different reasons,”said Anil Swarup, Union coal secretary. “The plant at Harduaganj is in this stage because coal was diverted to a more efficient plant at the request of the state government. At the Korba plant became super critical because the user agency could not arrange for its own wagon. However, both issues are being addressed,'” he added.

About the 40 plants with less than 15 days of coal, Swarup said it was due to excessive rain. Their stocks were not critical and were being made up regularly, he added. Swarup pointed out a number of plants did not want coal. They were rationalising inventory because coal supply was more reliable now, he said.

Coal production was down by 5.8 per cent in September while electricity generation went up by 2.2 per cent, year on year. “The April-October cumulative production of Coal India was 273.57 million tonnes against a target of 307 million tonnes. This must be causing the shortage of coal at power stations,” said Debashish Mishra, partner at Deloitte Touche Tohmatsu.

Ashok Khurana, director-general of the Association of Power Producers, said these shortages did not reflect the general coal supply position. ''These are project specific and there will be individual reasons,” he said.

The Centre, along with state-run power entities NTPC, REC and PFC, will soon launch a USD 2 billion clean energy equity fund to support the government's ambitious target of adding 175 GW renewable energy generation capacity by 2022.

"New and Renewable Energy Ministry has already processed the proposal and sent it to the Finance Ministry to initiate a USD 2 billion clean energy equity fund to push renewable energy capacity addition as envisaged by the central government," a senior official in the know said.

"The fund should be launched soon, within this fiscal, as all the spadework has been completed by the New and Renewable Energy Ministry after discussing it at a length with NTPC Ltd, Rural Electrification Corp (REC) and Power Finance Corp (PFC)," he said.

Ahead of the Paris climate talks in November last year, Power, Coal, New and Renewable Energy Minister Piyush Goyal had said that the central government is planning a USD 1 billion private equity fund for the renewable energy sector.

"We are planning a USD 1 billion private equity fund for renewable energy sector, initially seeded by government companies," Goyal had said during the 'Talkathon' event on the Paris conference. "The government is also seeking to collect USD 4 billion per year in the next 3-4 years for a clean energy fund," he had said.

The official further said: "Initial seed funding will be done by the central government to set up this fund from the National Investment and Infrastructure Fund. "The state-run NTPC, REC and PFC will also pitch in to create the fund."

Thursday, October 27, 2016

Paying heed to the Reserve Bank of India’s (RBI) advice to improve operational efficiency of companies whose loan accounts have gone sticky through induction of new owners or managers, the government has lined up a plan under which cash-rich public sector undertakings like NTPC, Coal India, Power Finance Corpn and Rural Electrification Corpn will buy equity stakes in stranded power plants.

The country added an average of 20,000 MW annually to its thermal power capacity over the last five years. But lower-than-projected growth in demand, fuel shortage and the inability of debt-laden power distribution companies to enter into new long-term power purchase agreements (PPAs) have left a sizeable portion of these new capacities stranded. According to an estimate, a total of 25,000 MW capacity — commissioned or under-construction — is lying idle for want of buyers or assured fuel supply agreements. Tenders for just 11,000 MW have been floated by the states since 2011 for new PPAs.

Dwelling on resolution of non-performing assets, the RBI had said: “Creative search for new management teams, including the possible use of public sector firms or private sector agents, is necessary, as are well-structured performance incentives such as bonuses for meeting cash flow/ profit benchmarks and stock options.”

“NITI Aayog and Power Ministry are currently in discussion to see if PSUs such as NTPC and PFC can take over small projects,” a senior government official said. As on March 31, 2016, NTPC’s reserves and surplus stood at Rs 80,536 crore, PFC’s 34,445 crore, REC’s 27,630 crore and Coal India Rs 27,581 crore. A senior NTPC official said that no official communication has been received by the company about the plan and he enumerated several possible problems with such buyouts. “If the banks convert their loan into equity and looks for a buyer then NTPC can step in but there are always doubts regarding possible over-invoicing in buying projects directly from the private companies,” the official said.

While private power plants are left high and dry, lack of buyers is not affecting NTPC much as it had signed PPAs a capacity of 37,000 MW between October 2011 and January 5, 2011. That was just before the central electricity regulator made it mandatory for states to adopt competitive bidding for signing PPAs. As of now, NTPC capacity pipeline would itself be able to meet new demand from states, analysts said.

NTPC has an aggregate capacity of around 24,000 MW under implementation including 10,000 MW of renewable capacity to be commissioned by 2019. This translates into a capex of about Rs 1.6 lakh crore. NTPC has also formulated a long-term corporate plan to become a 1,28,000 MW company by 2032, while its current capacity of over 47,000 MW. The government wants the Maharatna to use inorganic route as well to meet this target, rather than relying completely on greenfield projects.

“The power sector is going through a phase of consolidation. This presents an opportunity for PSUs also to use their balance sheet and acquire some stressed assets, possibly at a discount,” another government official said. He cited the instance of JSW, which recently bought non-PPA assets from JSPL at about Rs 4 crore/MW.

The stressed assets (gross NPA and restructured loans) of public sector banks rose from Rs 7.46 lakh crore (14.62% of gross advances) as on March 2016 to Rs 7.83 lakh crore (15.74%) as on June 2016. The sectors that have high incidence of NPAs include power and roads. It is estimated that loans of about Rs 1 lakh crore to the power generation firms are under stress.

State-owned NTPC Group is gearing up to cross the milestone of over 50,000 MW installed power generation capacity by March-end 2017 with expected addition of over 4,630 MW.

“The NTPC Group, including its joint ventures and other subsidiaries, will have over 50,000 MW of installed power generation capacity by the end of this fiscal,” a senior power ministry official said. The NTPC Group has an installed power generation capacity of 47,228 MW, which includes 800 MW of hydro and 360 MW of solar energy.

“Even if there is some slippage in capacity addition, the NTPC Group as a whole will cross the milestone of 50,000 MW by March-end 2017,” the official said.

The company is expected to commission 550 MW of solar power project at Mandsaur, Ananthapuram and Badhla. Besides, thermal power generation capacities at Kudgi (1600 MW), Bogaigaon (250 MW), Mauda (660 MW), Solapur (660 MW), Nabinagar (250 MW JV) and Meja (660 MW JV) are in line for commissioning by March-end next year.

Various projects with an aggregate capacity of around 24,000 MW are under implementation at 23 locations across the country. This includes 4,050 MW being undertaken by joint ventures and subsidiary companies. Out of the total capacity under implementation, 1,329 MW is based on diversified sources of renewable energy.

The company is quickly moving towards its ambition of achieving a solar portfolio of 10 GW out of the 100 GW target of the government by 2022. Over 1,700 MW renewable energy projects of the company are under execution.

Mumbai's peak power demand is expected to increase to 4,108 Mw in 2019-20, from 3,760 Mw now. Maharashtra Electricity Regulatory Commission (MERC) has, therefore, asked the two leading distribution companies, Tata Power and Reliance Infrastructure (R-Infra), to explore alternatives such as medium-term and long-term power purchase, through competitive bids, not continue to only tie-up with their respective group generation companies.

Tata Power’s distribution wing’s (Tata-D’s) agreement for power purchase from the group company's generating station at Trombay is ending in 2018. And, R-Infra D's agreement for power purchase from the group company's generating plant at Dahanu ends the same year.

Tata Power has a consumer base of about 600,000. R-Infra distributes power to three million consumers in Greater Mumbai. MERC, in its rate revision order of last week, approved an average cut of 1.93 per cent for R-Infra and a 1.85 per cent rise, including regulatory asset charges, for Tata Power for 2016-17 in Mumbai. It has directed both distribution companies to approach it for approval of their future power procurement.

Tata-D said as the available transfer capability of the transmission corridor was not sufficient to meet overall Mumbai peak demand, utilisation of embedded generation of the Mumbai system was essential to meet the overall Mumbai peak demand. Further, the company has cited several advantages of so tying up power, including reliability and islanding in case of a failure outside the Mumbai power system. Also, that additional charges on account of inter-state transmission and losses in such transmission would reduce the price competitiveness of any power bought from outside Maharashtra.

R-Infra D argued power purchase from the group company's Dahanu unit was beneficial, as this had a much lower fixed cost than newer plants. Also, technically unavoidable due to the islanding requirement of Mumbai.

R-Infra D had signed a long-term power purchase agreement with another group company, Vidarbha Industries, for 600 Mw, approved by MERC.